It's not just startups anymore: Google, Apple jump in on Internet of Things

The UpTake: It looks like we’re finally seeing the marquee combatants, Apple Inc. and Google Inc., square off in what will undoubtedly be the land grab of the decade: The battle to control every device in your house.

If you doubted that thesis then, please turn your attention to a couple of stories about some of Silicon Valley’s biggest technology companies that published this weekend. It looks like we’re finally seeing the marquee combatants, Apple Inc. and Google Inc., square off in what will undoubtedly be the land grab of the decade: The battle to control every device in your house.

According to a report in the Financial Times, Cupertino-based Apple will announce its new product line at its Worldwide Developers conference on June 2nd. The program is expected to roll out with support from a select list of appliance makers, and will probably include things like lights, door locks, thermostats and the like.

Aside from the fact that when Apple enters a market it becomes a mass market, this is an interesting development for a number of reasons. If true, it will mark the first foray by one of the big consumer-facing tech companies into smart home technologies.

Yes, I’m aware that Google bought Nest for $3.2 billion, but they haven’t done anything since they purchased it besides recall all of its thermostats over safety concerns. (More on the Dropcam purchase below).

Up until now, while there has been a lot of buzz about the Internet of Things, it’s come mostly from companies that are a little more removed from the public eye, like networking providers and chipmakers.

Another thing those early innovators in this infant market often lacked: Scale and market reach. They were either chipmakers who were looking for appliance companies to partner with on embedded chip products or people selling the connections for the devices. Other companies, like Comcast and AT&T, had a robust sales channel and were basically repackaging other people’s tech.

Apple, which is well on its way to being one of Austin's largest employers, is unique in that it cuts across all of those lines. It has its own tech and its own platform, controlling outright the one device that most of these devices will be connected to — the smartphone. (Or maybe the smart TV, if rumors about Apple TV playing a role in all this are true.)

It also has one of the world’s largest and most valuable developer communities in the form of the App Store, and a proven model of selling software functionality on top of hardware. That’s the kind of reach the smaller developers still proving their platforms and hoping to snag developers can only dream of at this stage.

And Apple has an advantage that nobody else in tech has been able to replicate: The Apple Store. Unlike virtually every other consumer tech company, Apple owns its own physical sales channel, and that sales channel has proven immensely successful.

Apple retail space is the most valuable in the world, topping Tiffany & Co. with more than $6,000 in sales per square foot. Don’t think that appliance makers like Whirlpool and Honeywell won’t be tripping all over themselves to partner with Apple and thus get a chance at being sold in the Apple store. Apple, with its unparalleled marketing power, could turn those appliances into top sellers.

Put simply, Apple entering the market has the potential to change the landscape overnight for the smart home.

But that doesn’t mean the other tech giants aren’t looking to get their piece as well. Google, as mentioned earlier, recently paid $3.2 billion for Nest Labs, the makers of the popular Nest thermostat (and ironically a company founded by Apple alumni.)

While you might think it would have soured on the prospect of the Internet of Things after it had to recall 440,000 of the company’s new smoke detector products, it seems to be full speed ahead for Google. Indeed, the company seems to want to add home security to its mix, with rumors that it’s looking to buy Dropcam, a company that makes a $150 security camera that streams footage to mobile devices. Although the information doesn’t publish a purchase price, Dropcam’s valuation was said to be in the “high three digit millions” when it raised its $30 million Series C round last year. That means this could easily be another billion-dollar bet for Google.

Rolling up home thermostat, fire alarm, and surveillance cameras together would give Google a credible entry into the home security space, and it is something that could easily be sold as a bundled product if and when Google Fiber becomes more than a limited proof-of-concept.

Essentially, that’s already what products like Comcast’s Xfinity Home do, and those types of products have done very well on the market so far. If Google can get a credible suite of products put together, then it could have a very competitive offering to what Apple eventually rolls out.

Either way, the trend line is clear. Expect the smart home to become even more of a battleground going forward as the big boys in Silicon Valley start to jockey for position.